Executive summary

The global automotive industry is on the verge of disruption. Digitization, increasing

automation and new business models have revolutionized other industries, and the
automotive industry will be no exception to such a revolution. The Indian automotive
industry has started to experience the effects of this global disruption. How prepared are
automotive stakeholders for this disruption? And how can they ride this change to expand
into newer areas?

This report outlines the importance and imminence of the disruption, the drivers of electric
vehicle penetration and the implications for all stakeholders, especially auto component
manufacturers. Acknowledging the upcoming disruption and reinventing the business
accordingly is the key to managing the changes that lie ahead.

E-mobility is here and now

Four technology-driven trends—electrification, shared mobility, connectivity and
autonomous driving—are leading the automotive industry to this disruption. These trends
will shift markets and revenue pools, change mobility behaviour and build new avenues for
competition and cooperation. Globally, revenue pools from conventional sources such as
one-time vehicle sales and aftermarket sales could continue to grow at their current pace
(low single-digit growth depending on geography). The real growth ahead lies in services,
which are poised to grow by an average of up to 40 percent per annum globally.

Electrification—an attractive solution to growing levels of vehicle pollution in metropolises—is

of particular importance to India today. The automotive industry is already feeling the effects
of electrification or e-mobility, both globally and in India. By 2030, electrification could lead to
electric vehicles (EVs including Battery Electric Vehicles, Plug-in Hybrid Electric Vehicles and
Hybrid Electric Vehicles) holding a substantial share (up to 50 percent of new vehicle sales in
a breakthrough scenario) of the global automobile sector1. If India sees a similar momentum,
it will significantly impact manufacturers across the automotive value chain.

Drivers of electric vehicle adoption

Earlier in 2017, former Power Minister Piyush Goyal announced the aspiration to not sell
a single petrol or diesel car in the country by 20302. While global EV sales remain low,
examples from other countries indicate that four factors—a mix of push and pull—could
determine the pace of EV penetration in India:

ƒƒ Regulations and incentives: Many countries have promoted e-mobility through a range
of incentives, but these alone did not drive EV penetration. A supportive ecosystem
that also establishes strict regulations on carbon emissions and regulations driven by
strategic intent (e.g., reduce current account deficit and geographic dependence driven
by crude oil) indirectly prompts the higher adoption of EVs.

ƒƒ Technology: As a large component of the overall EV costs, high battery prices impact
manufacturing and sales. Improved technology can reduce battery costs, increase

1 McKinsey Sustainable Mobility Initiative; The International Council on Clean Transportation (ICCT)
2 http://www.livemint.com/Industry/JvyUPmrumUS832KL5BKzhN/India-eyes-allelectric-car-fleet-by-2030-
says-Piyush-Goyal.html

viii The future of mobility in India: Challenges & opportunities for the auto component industry